Amazon didn’t just survive the first round of Covid lockdowns – it thrived because of them. With the Omicron variant rattling the stock market, investors are wondering if Amazon can pull it off again.
Although 2020 was a curse for brick-and-mortar businesses, it was a blessing for e-commerce. And among the most blessed of all was Amazon(AMZN).
With billions of people around the globe stuck at home due to government-mandated lockdowns, it’s no surprise that Amazon’s sales skyrocketed last year.
And it should also come as no surprise that, once lockdown restrictions eased in 2021, the Seattle-based behemoth saw its revenue growth start to slow.
That was especially the case in the third quarter, when Amazon’s revenue missed both top- and bottom-line expectations.
But now the Omicron variant has the world worried again. Currently, we don’t know just how dangerous this fast-spreading strain of COVID is. But the growing number of cases has people wondering if more lockdown mandates are in the works.
If the world were to shut down again, would Amazon’s revenue repeat last year’s performance? Let’s take a look at what might be in store for AMZN stock.
Would another lockdown hurt Amazon?
Analysts agree: If the Omicron variant causes another lockdown, it’s likely we’ll see another increase in e-commerce sales.
But this time, traditionally brick-and-mortar retailers have “wised up” and improved their own e-commerce efforts. Will this increase in competition sink Amazon’s profits?
At this point, Amazon is so huge that even an iceberg of rivals would hardly make a dent.
Other retailers have been suffering from supply-chain constraints and labor-related pressures. But Amazon has the advantages of scale. The company has also been investing in improvements to its supply-chain infrastructure to keep products on warehouse shelves.
As for labor, the company has always had a high turnover rate around 150%. Amazon has had plenty of practice of finding new workers.
In fact, given the company’s many advantages, it’s possible that investors could use Amazon’s stock as a hedge against another lockdown.
Amazon is Cramer’s No. 1 pick
Mad Money host Jim Cramer recently announced that Amazon is his No. 1 stock pick if the Omicron variant causes either another round of lockdowns or a slowdown in the economy.
He argued that – in addition to Amazon’s e-commerce business – its Amazon Web Services (AWS) segment sets it apart from the rest.
According to Cramer, no matter what happens with the Omicron variant or the economy, businesses will still migrate to cloud computing. And so far, AWS is the market leader by a wide margin.
“[Amazon] is a company that does well when people are scared to go to the mall. And it does well as more companies embrace the cloud, because Amazon Web Services is indeed the dominant player in cloud infrastructure,” he noted.
In addition, he noted that, when the going gets tough, Amazon can always get away with raising its prices.
Our take
Although we don’t know for certain what effects the Omicron strain will ultimately have on the global economy, it has already caused some extra volatility in the markets.
For investors, Amazon’s stock might work well as a hedge against another lockdown. After all, its business segments – including e-commerce and cloud computing – have already benefited from such a scenario. Why not do it again?
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